- 9 -9
to the sale of the PPNs. In an April 22, 1990, memorandum, Mr.
den Baas assured them that any such loss would be added to the
value of the LIBOR notes and, ultimately, borne by AlliedSignal
when the LIBOR notes were distributed to it. ABN officials
wanted this arrangement included in the partnership agreement but
Mr. den Baas explained that a written agreement was not feasible:
Of course, this arrangement cannot be included in the
documentation since in that case it would not be a
matter of a general partnership. Even a side letter
would seriously weaken this position. * * *
Mr. den Baas further explained that if AlliedSignal reneged on
its promise to bear any loss relating to the sale, ABN would not
allow the partnership to distribute the LIBOR notes to
AlliedSignal. After receiving these and other assurances, the
loan-approval committees authorized ABN's participation in the
venture.
III. Formation of ASA
A. The Bermuda Agreement
In Bermuda, on April 17 and 18, 1990, Mr. Matthews, Mr. den
Baas, and Peter H. de Beer, Deputy Managing Director of ABN Trust
Company Curacao N.V. (ABN Trust), an ABN affiliate, met together
for the first time. Prior to this meeting, Merrill Lynch
carefully explained the proposal to both ABN's and AlliedSignal's
representatives. As a result, all parties entered the meeting
with a detailed understanding of the venture and their respective
obligations. The negotiations between AlliedSignal and ABN
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